I've come across this fancy term called "Sunk Cost Fallacy" from some random Twitter post (Well at least I'm learning something from trolls). It's just interesting because I've always thought that I am making sound and rational decisions all the time. But it turns out, I'm not that smart in decision-making as I think I am. I couldn't remember how many times I've become prey to this Sunk Cost Fallacy, but now that I am aware of it, I'll try to be more conscious of my future business and life decisions.
What is Sunk Cost Fallacy anyway? It means when an individual continues a behavior after having invested time, effort, and money into something. In business, it is the "irretrievable cost" or the sunk costs. Whenever you invest in something, there's always the risk of not being able to recover the costs, especially when the desired outcome seems far-fetched or things don't turn out as expected. I think some business people are good at taking these risks probably because they can afford to lose or there are just no emotions involved. The reward must be worth it.
One example of Sunk Cost Fallacy was when I outsourced some of the tour agency website stuff that I couldn't do. I paid someone else to do a major tweak and customization on my WordPress site. I saw along the way that I wasn't really happy with the result and yet I still continued asking her to work on the project. It was the thought that "I've already paid for her service" so might as well just let her finish it - resulting to even more frustration and wasted time, money, and energy. Anyway, in the end, I reverted back to the original theme because I wasn't satisfied with the outcome. All the time, money, and effort were considered the "sunk cost".
Another example was when I was traveling back in the day. I was such a poor traveler back then so I would go to a place on foot if possible. Many times I found myself lost in some strange place. With the thought that "I've already walked that far", I'll just continue walking until I reach my destination, even if I'm already dead tired and there's transportation available around. I will continue doing something even if doesn't make sense anymore. I guess the sunk cost fallacy is just one way to justify all the pain and effort made or just to delude myself that nothing is wasted.
My fear of "sunk costs" also helps in making some practical decisions like when I wanted to enroll in this Muay Thai Class. The place is a bit far and I am tired from work every day so I know for sure that I might not be able to commit to the 3x a week of kicking and punching. So in the end, I didn't waste money on this class, plus no broken bones and dead bodies to this day so win-win!
One classic example of Sunk Cost Fallacy is when a woman stays in an abusive relationship or marriage. It baffles me when she's married to someone obviously shitty and yet she's pregnant again with their third child. Early on she could have already noticed the abusive behavior of her husband but she still stayed "for the kids" or because there's already time, emotion, money invested in the relationship that can never be retrieved. Then of course there's the fear of being alone and the hope that the man will change. She stayed for the kids wrecking herself in the process.
I made my own theory here based on my observation that "Sunk Cost Fallacy" is a common behavior in people from poorer countries. They are also most likely not willing to take investment risks which explains why it is harder for them to get ahead in society. Being born with nothing or having nothing, they cannot afford to lose something in pursuit of a greater reward. And when it comes to relationships, they are almost always willing to stay in unfavorable circumstances or abusive relationships after having already invested time, money, and emotion. The longer you are together, the harder it is to break up. Self-care also is also something foreign to them so it is not a surprise that most of them are willing to sacrifice and be unconditional for the sake of others. Because the relationship is their pride and that's all they have.
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